FINRA Fines JP Morgan Securities $2.8 Million for Supervisory Failures

JP Morgan Reportedly Violated Customer Protection Rule

According to the Financial Industry Regulatory Authority (FINRA) today, the regulator has fined J.P. Morgan Securities $2.8 million for violating the Securities and Exchange Commission’s (SEC) Customer Protection Rule and for related supervisory failures. The SEC rule creates requirements to protect customers’ funds and securities.

The Customer Protection Rule requires a broker-dealer, which maintains custody of customer securities, to obtain and maintain physical possession or control over certain of those securities. These securities must be segregated in a “control location” and be free of liens or any other encumbrance that could prevent customers from taking possession of their securities. A firm cannot use segregated securities for its own purposes. This ensures that customers could recover their assets in the event of the broker-dealer’s insolvency.

From March 2008 to June 2016, FINRA found that J.P. Morgan Clearing Corp. did not have reasonable processes in place to ensure that its possession or control systems were operating properly.

Due to systemic coding and design flaws, shares that should have been segregated were available for the firm’s use, causing recurring and unresolved deficits and unreasonable supervision.

J.P. Morgan reportedly created deficits in foreign and domestic securities valued at hundreds of millions of dollars, by failing to move and maintain securities in good control locations. According to FINRA, J.P. Morgan failed to move Italian securities to a good control location for nearly two years, and on one sample day, created a deficit in 81 Italian securities worth approximately $146 million.

The firm neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

Investigating Potential Claims

The White Law Group is investigating the liability that J.P. Morgan Securities may have for losses sustained by their clients.  Brokerage firms are required to adequately supervise their agents to ensure they are complying with FINRA rules. If it is determined that the broker dealer failed to supervise their agents, they can be held responsible for losses in a FINRA arbitration claim.

FINRA is dedicated to investor protection and market integrity. It regulates one critical part of the securities industry – brokerage firms doing business with the public in the United States. FINRA administers a dispute resolution forum for investors and brokerage firms and their registered employees.

Are you concerned about your investments with J.P. Morgan Securities?  The attorneys at The White Law Group may be able to help you. For a free consultation with a securities attorney, please call (888) 637-5510.

The foregoing information, which is all publicly available on FINRA’s website, is being provided by The White Law Group. The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.

For more information on The White Law Group, please visit www.whitesecuritieslaw.com